actuallylike wrote: » For example, I can borrow xSUSHI from protocols like AAVE using collateral that isn't SUSHI, so there is ways of obtaining xSUSHI without having SUSHI.
actuallylike wrote: » So, if I bought SUSHI at $2...
I can also swap my xSUSHI for something other than SUSHI, which looks like another disposal of an asset.
actuallylike wrote: » So it appears that staking returns is a kind of grey area, but is the action of staking itself taxed? Lots of tokens take this x model, where you deposit your token and receive an interest bearing token in return (e.g. Stake SUSHI, receive xSUSHI in return). It looks like it could be considered a swap of sorts.
Bob24 wrote: » There is no CGT because you never disposed of anything, and there is income tax due on the reward amount you received.
It could also be called interest on some platforms but I am using the generic word reward on purpose, as to my understanding from Revenue's perspective this is subject to income tax rather than DIRT
Mellor wrote: » I don’t think that’s correct. Mining is subject income as it’s providing a service for payment. Agree there. But staking/holding/depositing on a platform is not performing a service for payment. It’s just holding in a way that earns a reward. The closest parallel would be bonus shares. Where holders of existing shares are rewarded bonus shares they are subject to CGT, not income tax.
Mellor wrote: » Dirt is only payable with financial institutions. I can’t see how it could currently apply to crypto.
Bob24 wrote: » Agree Revenue should really clarify their position, but Koinly as well as a tax firm guidance posted on the thread before are saying this is subject to income tax.
The way I see it, the service you are providing is that you are lending your crypto to someone and in exchange they are paying you compensation for the service
So if Revenue was considering the likes of Celsius and BlockFi as financial institutions paying interest on deposit accounts for the purpose of tax liabilities, DIRT would be due..
Mellor wrote: » So in that example, you bought sushi. Why would you not own it.
actuallylike wrote: » Maybe instead of bought, we should say swap. Say I swapped ETH for SUSHI on uniswap. afaik, I owe cgt on the difference of the ETH at the point of swap and the point from when I bought the ETH.
When I stake my SUSHI, I receive xSUSHI, not an NFT, a brand new ERC20 token. I don't see the difference between staking in this scenario and swapping on uniswap. They both result in a disposal of an asset, because I don't have the SUSHI anymore, I have a brand new independent token (xSUSHI).
If cgt is not applicable at this point, what about if I swap my xSUSHI on uniswap (which I'm able to do). Say I swap.it immediately after staking. If my first paragraph is right, my gains since I obtained the xSUSHI is effectively nil, because I've just obtained it. Is that way to avoid the cgt on the SUSHI? Surely not.
I probably have to pay cgt on the gain from when I first bought the btc right?
namloc1980 wrote: » Is there a definitive Revenue view on the interest earned on crypto on the lives of Blockfi/Celsius?
Bob24 wrote: » Legal advice here stating that “Passive income derived from the staking or lending of crypto-assets would be subject to income tax rather than CGT (similarly to interest income or dividend income from conventional investments)”: https://doylekeaney.ie/news/crypto-assets-high-level-irish-tax-considerations/ .
Peregrinus wrote: » Whether the payment is made in fiat, in crypto or in kind is unlikely to determine the issue;
Peregrinus wrote: » If you're trying to work out what view the revenue will take of a particular transaction or event involving crypto, the better course is not to focus on the ways in which that transaction/event differs from transactions/events involving more conventional investments, but on they ways in which it resembles them. That's probably going to give you a better guide as to how the revenue will think.
Bob24 wrote: » Agree, and even though as you say it is unlikely to make a difference, interest on crypto deposits aren't necessarily paid in the same crypto anyway. They could be paid in anything (including the same crypto as the deposited amount, another crypto, or even possibly a fiat currency).
Bob24 wrote: » While I agree with this, I think it isn't always easy to put in practice and sometimes there are things going-on in crypto (especially related to De-Fi) for which it is hard to find an equivalent elsewhere (at least at an individual level - as DeFi tends to bring to the masses concepts which previously only applied to institutional entities, which are subject to different tax treatment). So some things are unfortunatly up for interpretation.
Peregrinus wrote: » Genuine question: is there much of a lending market in crypto? Does it happen on a sufficient scale for us to be able to identify prevailing interest rates for various different cryptos? Who borrows crypto, and what for?
Peregrinus wrote: » People arguing for particular (and invariably favourable) tax treatment for crypto always focus on the ways in which crypto differs from other investments. I suspect that this approach is driven by wishful thinking.
Mellor wrote: » Additional tokens issued to token holder who have staked are by their nature more in line with bonus issues.
gordongekko wrote: » Interest is case iii income and subject to income tax. I'm not really sure how this is even a point for discussion.
Bob24 wrote: » Yes, for me what is more open for discussion is when you take part in a DeFi liquidity pools. I.e. is it considered that you are actually forfeiting your assets to the liquidity pool in exchange for other assets in which case there could be CGT. Or that since you kind of have a guarantee that you can recover your original assets, it effectively is a deposit to the pool which is attracting income? I think this is very much open for discussion as I find it hard to identify similar transactions that individual taxpayers would make outside of DeFi. But IMO it is pretty clear that regular rewards related to simple deposits on the likes of Celsius, BlockFi, or CDC don’t constitute asset price appreciation and are rather payments made to you by those services as profit-sharing related to them lending-out assets on your behalf. I am keeping an open mind for official of credible sources saying otherwise, as Revenue could have a strange view on this and at the end of the day their view is what matters, but I haven’t seen any to date (quite the opposite - the few legal opinions have I seen are all backing my personal understanding).
namloc1980 wrote: » Any thoughts on free crypto rewards? I did some quiz thing on coinbase and got about €20 in free crypto (Compound/Amp). Is that income for tax purposes or what? And what happens if, in theory, those increased in value a lot.....CGT then if I sold them but what would be the cost basis? Would it be €0?
Mellor wrote: » I understand that you’d suspect that. But in this case I am actually arguing the opposite. In that crypto should be treated as other securities are. Additional tokens issued to token holder who have staked are by their nature more in line with bonus issues. But this depends on the mechanics of the issue I guess
Looking for some guidance here.
Back in January I invested in a crypto that did very well, Matic. Foolishly I converted a large chunk of it to another crypto and converted some to FIAT which I cashed out to deposit to Binance. Reason being is the crypto I wanted wasn't available on the exchange I bought my Matic.
I think I'm now susceptible to paying a large tax bill on gains even though I've essentially reinvested most of these in another crypto. In order to avoid that, would I be better off investing that figure in crypto to offset these gains i.e. spend $5k on stocks/crypto to avoid paying $5k in tax?
It was my first foray into proper trading and I made a bit of a mess of it, I think.
The important point to grasp here is that, when you disposed of your Matic, you realised a gain which was chargeable to tax. Whether you disposed of the Matic in return for another crypto or for fiat currency didn’t change that. And what you did with the disposal proceeds also didn’t change that.
You’re post suggests that you think you incurred a tax liability because you took some of your disposal proceeds in cash, and then withdrew that cash and paid it to another exchange to buy a different crypto. No; you incurred a tax liability before that, when you disposed of your Matic for more than you paid for it.
Think of different cryptos as being like different shares. If you acquire a share, and then it goes up in value, and then you dispose of it, that’s a chargeable gain. You don’t avoid tax by disposing of it, not by selling it for cash but by exchanging it for a different share using the same broker or on the same stock exchange. It’s the same with crypto.
So, is there anything you can do now to avoid paying tax? Probably not. Putting more money into crypto doesn’t generate a loss which you can set off against the gain that has already accrued. But you mention that you have acquired another unnamed crypto. If, by happy chance, that crypto has fallen in value since you acquired it, if you dispose of it before the end of the year you will generate a loss than you can set off against the gain that you have already generated.
Thanks for that. I have acquired another crypto since, and it has dropped a bit in value of the last few months, but not sure if I want to get rid of it tbh as I think it will blossom at some point.
Well, if you think the long-term prospects for growth are good you could sell it now, to crystallise a loss that you can set off against the gain you have already accrued, wait four weeks, and then buy it back and wait for the rise. Of course, you'll then have a lower acquisition cost, so when you dispose again you'll have a higher gain. So what you are really doing here is deferring tax on the gain that you have already accrued, not avoiding it entirely.
Not sure what your new asset is but, if there's a wrapped version of it, you could swap it for that to take the tax loss. That way you won't have to wait a month to repurchase.
So BTC-->wBTC or MATIC-->wMATIC etc
So I have been thinking, as we know artists get very generous TAX free allowances here in Ireland, so if you where create a NFT and some one was to buy it for 50 ETH could you claim to be a artist and avoid the 33% CGT?
You could send your crypto through a mixer or use Monero , convert to ETH in a wallet that no one knows and then buy your own NFT for crazy money and no one would know who the buyer is. It the only reason i can think of for someone to spend $11,8 million on a NFT
The artists’ exemption is an exemption from income tax, not from CGT.
But . .
You pay CGT if you buy something and then later sell it for more than you paid for it. (Simplified version, but close enough). If you make something and then sell it, that doesn’t attract CGT; it attracts income tax.
So, if I write novels or paint pictures or whatever for a living, the income I get from that would be subject to income tax, were it not for the artists’ exemption.
But . . .
If I have a bunch of crypto that has appreciated hugely in value, if I spend it buying something that is a disposal, and I’m liable to capital gains tax on the gain that I realise when I dispose of the crypto. That doesn’t change if the thing I buy is a creative work of art. It also doesn’t change if I also work as an artist, and earn money by writing novels, painting pictures or creating rinky-dink NFTs. The money I earn by selling novels, paintings and NFTs is exempt from income tax, but the gains I realise by acquiring, holding and disposing of crypto are not exempt from CGT.
Crypto to crypto tax is legitimately tyrannical. It makes no sense, and is just there to make sure you lose asset wealth. Cashing out to fiat is fine, that should be taxable, but do you honestly think I'm going to give you 33% of my portfolio simply because I clicked a few buttons? This deranged system is why I moved to a different country. I will not give my portfolio to pay for the world's most expensive hospital. Neither should you.
